Monday, June 7, 2010

Apollo Tyres marches into Europe with local brands

Nearly a year after acquiring Dutch tyre maker Vredestein, India’s Apollo Tyres today consummated the marriage by delivering a selection of its own products in the European market.

With the launch of six of its products in Europe today, Apollo became the first Indian company take this uncharted road into the 300-million unit European tyre market.

Apollo had bought Vredestein from Amtel of Russia for ¤36 million. In 2008, it had withdrawn from Hungary where it was looking at prospects, due to political opposition, and started looking for alternative sites. Its executives said today the abandoning of their plans in Hungary now looked like a blessing in disguise, given that the company had already recovered the money it had paid to buy Vredestein. Post-acquisition, Vredestein Banden BV was rechristened Apollo Vredestein BV.

Along with the Apollo brand’s launch in Europe, the company is also keen to bring the Vredestein brand to India. However, this will have to wait for capacity expansion envisaged for the company in its home ground, Netherlands. This could happen in a year, when the Dutch tyre maker would have expanded its capacity from 5.1 million tyres to six million a year, with an investment of ¤6.6 million.

Global ambitionsSenior executives from both Apollo and the subsidiary, Vredestein, who were present at the launch at the Reifen 2010 tyre show in Cologne, said this the beginning of the company’s global ambitions. Apollo wishes to enter the league of the top 10 global tyre markers by 2015, by pushing its sales turnover to over $5 billion. At present, this league is occupied by the likes of Bridgestone, Michelin and Goodyear.

Apollo Tyres’ current turnover which is around $1.7 billion (by the end of 2009-10), is expected cross $2 billion before the close of the current financial year.

The company made its first mark outside India when it acquired Dunlop in South Africa Rs 290 crore in 2006. Unlike the more recent Dutch acquisition that gave Apollo a pan-European reach and access to a 300-million tyre market, the South African buy is for a more restricted market of about 35 million units a year. The largest constituent of this market, South Africa, is now about 10 million units a year.

The company’s global ambition of achieving a $5 billion top line over the next five years will be achieved by both new projects and acquisition in regions other than where it already has a strong presence. Chairman Onkar Singh Kanwar said the company’s big move could happen in Southeast Asia or Latin America. With concentration of expensive natural rubber in South East Asia, the company has more compelling reason to set a base in the region.

As for China, the company is willing to look at an arrangement with a local source who could be Apollo’s contract manufacturer, Kanwar said.

Despite the global ambitions, the company believes its board can continue to be dominated by Indians. The management committee within the company is however multi-lingual and multi-ethnic, with members from its subsidiaries in Europe and Africa represented in it.